University Adopts New Process for Socially Responsible Investing

In conversation with Claire Burlingham, UVM controller

In November, the UVM Board of Trustees adopted an important resolution, two years in the making, with little fanfare. The Socially Responsible Investing Work Group, which reported to the Investment Subcommittee of the board, was dissolved. Taking its place was the Socially Responsible Investing Advisory Council, reporting to Vice President for Finance and Administration Richard Cate.

The name change may have sounded technical, or even trivial, but it marked a significant shift in the world of socially responsible investing, or SRI, at UVM.

The old work group was mandated by its charter to wait passively for community members to present it with detailed, fully researched SRI proposals, which it often needed several semesters to deliberate on before it could act. The new, more agile advisory council will actively solicit ideas from the community, then move on them with relative dispatch, thanks to a more streamlined process and enhanced staff and resources. In addition to divestiture, the group will also have two more tools in its SRI toolbox – shareholder initiatives and proxy voting – to prod companies to act in a more socially responsible manner.

UVM Today had a chance to sit down with Claire Burlingham, UVM controller, who spearheaded the evolution in UVM’s SRI approach, just weeks before the advisory council holds its first town meeting, a signature element of the new SRI order. The town meeting will be held on Wednesday, Feb. 20 from 4 p.m. to 6 p.m.in the Davis Center's Silver Maple Ballroom.

SRI has a long history at UVM. Tell us about it.

SRI is not a new concept at UVM. It started in 1978, when the board of trustees established an ad hoc committee. Not much happened until 1985, when the apartheid and South Africa issue came up. Then in 1988, there was a resolution to Phillip Morris calling for the end of all advertising and promotion of tobacco products. The 1990s were slow from an SRI perspective. In the 2000s, things picked up again when the Darfur group STAND (for Students Take Action Darfur Now) made a strong proposal for divestment, which the university acted on. Shortly after that, SAW (for Students Against War) effectively argued for divestment from companies making cluster munitions and depleted uranium.

In all these cases, there was strong community support for the actions taken. But the next proposal wasn’t so clear cut.

Yes, the real challenge came with the Israeli-Palestinian divestments (which called for UVM to divest from companies that supported Israeli activities in Palestinian lands). Until that point, for all of the proposals that were brought forward, it was easy to build consensus and to recognize community and university support. The Palestinian-Israeli proposal was the first one where there wasn’t consensus on either side of the issue. When there was a split in the community, our charge said we needed to come up with some way to find if there was consensus. We decided to hold a public hearing to solicit that input from the campus community at large. Not surprisingly, the university was divided straight down the middle. We recognized that we hadn’t really articulated our evaluation criteria for situations like this.

What happened?

We tabled the proposal. And based on that experience, we recognized we had a kind of identity crisis and needed to come up with better operational guidelines -- to understand who we were, the role we needed to play, and what we could and could not do. In the fall of 2010, the trustees authorized a hiatus for us on the call for proposal process. They charged us with really looking at how SRI is handled and organized at other public and private institutions. So we embarked on that over an 18-month period and presented the board with our proposal in August, 2012.

I think you focused on six public peer institutions and 12 private peers and aspirants, and visited a number of them. What did you learn?

Most of the publics had some sort of advisory committee structure, which was made up of representatives of constituency groups, who either advised the president or the VP. Upon request of the investment committee or administration, the advisory committee could research a particular interest or company. None of the public institutions we looked at solicited proposals from the university community.

What about the private institutions?

Most had an advisory committee structure. The issues usually arose from the administration or the investment subcommittee and were not a product of a campus-wide call for proposals. There were two cases, Stanford and Columbia, that did consider proposals from the university community.

So what did you recommend for UVM?

We recommended the SRI workgroup of the Board of Trustees be dissolved and that a new advisory counsel to the vice president for finance and administration, Richard Cate, be established with the same membership. We would make our recommendation to Richard, and he would decide whether or not to bring them to the Investment Subcommittee.

How did you decide to handle community input?

Unlike most of the other schools, we wanted to build our program around ideas that came from the community. But we decided to move away from having a call-for-proposal process and to have a town hall meeting twice a year instead, during each of the major semesters. At the town hall meeting, the university community would be invited to bring forward issues of social, moral, and ethical concern that they wanted the SRI Counsel to review and hoped would be taken to the Investment Subcommittee for action.

And if you learn that the community is divided on an issue?

We have a set of criteria, based on Our Common Ground, that allow us to narrow the ideas down to one or two per semester. One of the factors is that there has to be strong university consensus for us to take it up.

Were there other problems with the old process you tried to address?

Yes. Given our process, the way we were structured and the lack of resources we needed to do our own research, it was very difficult for us to move forward very quickly to make a recommendation. We often needed three or four semesters to be able fully vet the proposals and get organized enough to make a recommendation.

How does the new process help?

The group felt very strongly that, in order to make a thoughtful and informed decision, we needed to employ the assistance of a graduate fellow to do the research our volunteer group wasn’t able to do. So, we were able to secure the financing for a graduate fellow in the Office of Sustainability to work with us full time.

How many proposals to you think you’ll be able to move forward in this new arrangement?

We’re hoping that the new process and the resources of the graduate fellow will enable us to take action on at least one of the issues per semester, and perhaps two, depending on the complexity of the issue.

You’re hoping the new process will allow more opportunity for the community input than the old process did, right?

Correct. In the old structure, the onus to do the research was really on the group making the proposal; the work group was looking for a very well thought out, vetted research proposal to come forward. And that was challenging for some people, and consequently a number of them decided not to pursue their proposal. Now, through the town meeting process and the research capability we have, we just want people to tell us what’s on their mind – to tell us what they believe we should be looking at or things that are important. So I think people will be more willing to come forward.

Are you confident that the one or two you choose will be representative of the community’s priorities?

Yes. The advisory council is meant to mirror the UVM community, with representation from the faculty, staff, undergraduates and graduate students. Each of the members serves a two-year term. For continuity’s sake, the membership stayed the same in the change from the work group to the advisory council.

While divestment will still be a tool in your toolbox, you’re looking at making much more use of shareholder initiatives and proxy voting. What are those?

Any shareholder can submit a proposal to a corporation, and the company is required to put it on the agenda for a vote at their annual meeting. Ninety-nine percent of stockholders aren’t going to show up, but they still have the right to vote on the issue. So proxy voting ballots go out to all shareholders before the annual meeting. The ballots might ask shareholder to vote for directors or to approve an auditing firm, but proposals from institutions like UVM -- so called “shareholder initiatives” -- also get on the ballot and can gather significant support. Conversely, we can vote by proxy -- that’s “proxy voting” -- if we see a shareholder initiative on the ballot that the UVM community, with the approval of the board, has given us the ability to vote on.

Our research shows that shareholder initiatives and proxy voting seem to be what corporate America pays attention to, more so than just divestment.

You have the first town meeting coming up on Feb. 20. What are your hopes for it?

It’s our hope that the town meeting is inclusive, with as many individuals and groups university-wide participating as possible. We hope that it brings forth to the advisory council issues that are on the minds of the university community, whatever those issue may be that are of social, ethical, or moral concern and that relate to our investment policies.